Articles

Nancy Goldfarb CFP® CPA PFS MBA CDFA MS in Taxation

Smart Transition Strategies LLC

Financial transparency matters throughout a marriage and becomes especially important when a separation or divorce is possible. This primer explains practical warning signs that may justify closer review of household, business, retirement, insurance, tax, and estate-planning records. No single sign proves that an asset is hidden. Patterns, unexplained changes, and missing records are reasons to document facts and consult qualified legal, tax, and financial professionals.

New York and New Jersey use equitable-distribution principles, under which marital property is divided fairly under applicable law rather than automatically divided in half. Definitions of marital property and relevant cutoff dates vary by state and by the facts of the case. Assets that may require review include real estate, bank and brokerage accounts, business interests, stock options, pensions, retirement accounts, annuities, life insurance, vehicles, digital assets, trusts, and tax attributes.

If one spouse has handled most household bookkeeping, the other spouse should begin participating in routine financial administration: review complete statements, retain copies of tax returns and supporting schedules, understand account ownership, and maintain secure access to records. A Certified Divorce Financial Analyst, forensic accountant, attorney, and tax professional can help determine which questions and records matter.

TWENTY THREE WARNING SIGNS

The following conduct may warrant closer review. Preserve records lawfully, avoid accessing accounts without authorization, and seek professional advice before taking action.

1 Controlling all family finances

A spouse may insist on exclusive control of banking, bill payment, investments, tax records, and account credentials, leaving the other spouse without current information. Shared knowledge and lawful access to household records are essential to financial security.

2 Changing the treatment of retirement or annuity assets

Earned Income Requirement: Contributions to an IRA must be based on earned income, which includes wages, salaries, tips, professional fees, and other compensation for personal services. Passive income (e.g., interest, dividends) does not qualify.

Citation: IRC § 219(b)(1), which states that the contribution is allowed only to the extent of compensation, and § 219(f)(1) for the definition of compensation.
Date of Marriage: Contributions, account growth and transfers are relevant to the determination of marital retirement accounts. Transfer histories and unusual transactions including issuance of ‘replacement checks’ to IRA post filing joint tax returns for deductions for IRA contributions, for purpose of altering the ownership of the IRA or for divorce planning.
Subpoenas of retirement accounts - opening documents and contribution records, checks, tax returns filed, Forms 5498 and 1099-R. There are four different ways to resolve divorce: divorce mediation, arbitration, collaborative divorce and litigation. If litigation is with ‘clean hands’, the Subpoenas, Depositions and Evidence, submitted by Trial Experts and Professionals, in the best interests of both parties, are to be entered as Trial Exhibits in the Family Court.
Imperative that the QDROs, IRA Allocation Orders, IRA Letters of Instruction be signed and delivered to the Judge promptly. Until signed, the death or withdrawal or reinvestment of the affected funds could preclude or further impede your recovery of those assets. If your ERISA experts request your matrimonial attorneys file motion to enforce the litigant's rights (your rights) to retirement assets and law firm fails, file an Ethics Grievance with your State Bar Association.

If you are a trustee or have another documented right to information but are not receiving statements for whole life insurance, annuities, or related products, contact the insurer or custodian through an authorized channel. If you discover, including in speaking with your insurance agent or another professional, that an annuity or retirement asset acquired during the marriage may have been transferred into a spouse's business retirement plan, contact the appropriate business owner, officer, partner as well as the plan administrator, after checking whether the plan administrator is independent or is your spouse.

Ask a financial advisor who is independent of your spouse's advisor to help locate any publicly available Form 5500 filing in the Department of Labor's EFAST2 database. A filing may identify the plan sponsor and administrator. Filing and disclosure rules differ by plan type.

3 Transferring assets through friends relatives custodial accounts businesses or trusts

A spouse preparing for divorce may increase gifts, claim questionable loans, or run up joint credit-card debt before filing. Compare the timing and purpose of these changes with the family's usual financial practices, and ask counsel to assess whether they affect the marital estate.

Review transfers of paychecks, cash, stock, or other investments to personal accounts, accounts in another person's name, custodial accounts, business entities, trusts, or tax-identification numbers that do not match the apparent purpose of the transaction. Preserve transaction records and ask professionals to trace ownership, control, consideration, and beneficiaries.

Also review unusual increases in gifts to relatives. For 2026, the federal annual gift-tax exclusion is $19,000 per recipient for qualifying present-interest gifts. Each spouse may generally use a separate $19,000 exclusion, so two spouses may transfer up to $38,000 per recipient if the requirements are met. If one person gave each of two children $19,000 annually for 30 years, the total transferred would be $1.14 million. If two spouses each made qualifying $19,000 annual gifts to each child, the 30-year total for two children would be $2.28 million, before investment growth. These long-term totals are illustrations that hold the annual gift amount constant; future exclusion limits and individual circumstances may change.

Gifts above the annual exclusion generally require the donor to file IRS Form 709, but filing does not necessarily mean gift tax is due. The excess generally reduces the donor's available lifetime gift and estate tax exemption. For 2026, the federal basic exclusion amount is $15 million per person. For example, if a person gives a child $75,000 in 2026 and the entire gift is a qualifying present-interest gift, the first $19,000 may be covered by the annual exclusion and the remaining $56,000 is generally reportable and reduces the donor's remaining lifetime exemption. Gift-splitting, gifts in trust, prior taxable gifts, citizenship, and state law can change the analysis. Giving with 'warm hands' should be coordinated with a qualified tax and estate-planning adviser.

4 Pressuring you to sign incomplete tax returns or financial documents

Do not sign a return after seeing only its signature page. Review the complete return, schedules, statements, and supporting documents. If you do not have time or information to review them, consult an independent professional before signing.

5 Pressuring you to execute a power of attorney

A durable power of attorney can give an agent broad authority over specified financial matters. Choose an agent you trust and obtain independent legal advice before signing or changing any power of attorney, especially during a separation. Before and during marriage, use an independent estate and trust attorney to prepare or review your Will, Durable Power of Attorney, and Health Care Proxy.

6 Denying access to bank or brokerage information

Missing statements, changed passwords, unfamiliar security questions, or refusal to provide lawful access may justify a documented request for complete records. Do not attempt to defeat another person's security controls.

7 Overpaying federal or state taxes

Unusually large estimated-tax payments or credits may reduce cash on hand and later produce a refund. Compare payments with prior years, current income, projected liability, tax transcripts, and filed returns. Overpayment alone does not prove misconduct.

8 Overpaying bills credit cards or estimated taxes after divorce is filed

Grossly overpaying estimated taxes, credit cards, utilities, or other bills after a divorce filing may shift cash into future credits or refunds. Assets may also be understated on the Case Information Statement filed with the Family Court. Reconcile payments, statements, refunds, credits, and the figures reported to the court. Repeated or unexplained discrepancies should be reviewed with counsel and a financial professional.

9 Claiming loans or debts owed to family or friends

A spouse may report personal loans or other liabilities that lack ordinary documentation. Ask for signed loan agreements, proof of funds advanced, repayment records, interest terms, tax reporting, and communications that establish when and why the debt arose. If you suspect that a family or friend loan agreement was backdated or fabricated, ask your attorney whether a qualified handwriting or document examiner should evaluate it and, when appropriate, testify.

10 Taking on unusual debt or borrowing against assets

Large lines of credit, multiple mortgages, cash advances, or loans against life-insurance cash value can reduce apparent net worth. Review applications, closing documents, statements, disbursements, and the use of proceeds. If suspected undisclosed loans involving family or friends are absent from mortgage or other debt applications, ask counsel whether bank records and testimony from the mortgage officer should be obtained through subpoenas or depositions. If a trust owns a policy, review the trust agreement and trustee records with counsel.

11 Overstating expenses

Inflated personal or business expenses may make income or net worth appear lower. Compare claimed expenses with invoices, bank and card statements, general ledgers, tax returns, and historical spending patterns.

12 Moving financial information out of the marital home

Financial records may be moved physically or digitally to a relative's home, an office, a private mailbox, or another storage location. If less mail is arriving or electronic notices change unexpectedly, contact financial institutions, insurers, and creditors through authorized channels to confirm the mailing address, email address, delivery preference, and persons authorized on the account.

13 Redirecting statements to a business address or post office box

Changing the third line of an address, ZIP code, email address, or paperless-delivery setting can make statements harder to trace. Compare addresses across tax records, credit reports, insurance policies, loan files, and financial statements.

14 Understating income

A business owner or professional may delay billing or collection, write off receivables, change the timing of deposits, or shift revenue between entities or periods. Compare accounts receivable, deposits, contracts, tax returns, payroll records, and historical margins.

15 Postponing a bonus promotion or other compensation

Compensation may be deferred until after a valuation date or divorce milestone. Review employment agreements, bonus plans, equity awards, performance reviews, payroll records, and communications about timing.

16 Using gambling or margin activity to explain large losses

Casino activity, securities trading, and margin borrowing can create real gains and losses, but they can also obscure cash flow. Obtain complete gaming, brokerage, transfer, margin, and tax records and reconcile deposits and withdrawals. Margin debt may be concealed through brokerage accounts held in a friend or family member's name. Checks from a joint account used to pay that person's margin debt may warrant further review. Ask counsel whether subpoenas for bank and brokerage records, and depositions where appropriate, are needed to trace the payments and identify who benefited.

17 Taking out unnecessary business loans

New business debt may be legitimate, but unexplained borrowing can reduce apparent equity or move cash outside ordinary operations. Review loan applications, guarantees, bank statements, general ledgers, and the use of proceeds.

18 Deferring salary commissions or partnership draws

Reduced compensation near a divorce milestone may be temporary or strategic. Compare current payments with employment terms, prior years, work performed, owner distributions, retained earnings, and post-divorce payments. Include deferred salary, commissions, and partnership draws, as well as noncash business perks such as company-paid vacations, fully paid or subsidized meals, and transportation. These benefits can matter when evaluating the full compensation picture.

19 Taking frequent or unusually expensive business trips

Travel may be legitimate, but unusual frequency, cost, destinations, reimbursements, or companions may warrant comparison with calendars, receipts, company policies, card statements, and tax deductions.

20 Selling a marital asset below an independent appraisal

A below-market sale, private sale, related-party sale, or later repurchase may reduce reported value. Preserve appraisals, listing history, offers, buyer information, closing records, and subsequent ownership records. If the Family Court appoints a real estate professional, or a professional is presented as independent, ask your attorney to examine prior relationships and obtain an affidavit addressing independence when appropriate. For example, a spouse may have hired that same realtor before announcing a divorce to prepare the marital home for sale or arrange a rapid listing. Listing agreements, communications, and information from household employees or cleaning services may help identify the earlier involvement. Confirm the facts before drawing conclusions.

21 Making unusual ATM or cash transactions

Frequent or large withdrawals, deposits, cashier's checks, or transfers can be difficult to reconstruct after records age. Download statements and transaction detail promptly, and request older records through lawful discovery when needed.

22 Changing spending habits or making major purchases

A sudden claim of financial distress combined with luxury spending, a much more expensive home, or other large purchases may be inconsistent with reported income or net worth. A major purchase or diversion of funds may be concealed within a seven-figure remodeling contract. The phrase "Build a house, lose a spouse" captures the concern; the records must establish what actually occurred. Trace the source of funds, financing, title, and beneficial ownership.

23 Presenting incomplete pay stubs or tax returns

Review full pay statements, year-end forms, tax returns, schedules, K-1s, brokerage statements, retirement records, and business returns. Compare reported wages with deductions, deferred compensation, benefits, reimbursements, equity awards, and direct deposits.

Practical Next Steps

Action	What to do
Create an inventory	List known accounts, properties, debts, businesses, trusts, insurance policies, retirement plans, tax returns, and digital assets.
Preserve records lawfully	Download or copy records you are authorized to access. Keep an organized log of missing statements, address changes, unusual transactions, and requests for information.
Reconcile cash flow	Compare income, deposits, transfers, spending, debt, tax payments, refunds, and changes in net worth across several years.
Use the right professionals	Coordinate your divorce attorney, tax adviser, Certified Divorce Financial Analyst, forensic accountant, valuation specialist, and estate-planning attorney so questions are assigned efficiently.
Protect your security	Use a private email account, strong unique passwords, multifactor authentication, secure document storage, and a safe mailing address when appropriate. Retain an independent IT specialist who has never worked for your spouse's company to help secure computers in the marital home that you are authorized to use. Ask counsel about preserving relevant evidence before devices or files are changed.

A Primer on Finding Hidden Assets in Divorce